Refer to Figure 10.3. If full-employment GDP is $500 billion and the economy is on AD0,

A. An inflationary gap exists, and AD must decrease by less than $100 billion to eliminate it.
B. A recessionary gap exists, and AD must increase by more than $100 billion to eliminate it.
C. An inflationary gap exists, and AD must decrease by more than $100 billion to eliminate it.
D. An inflationary gap exists, and AD must increase by $100 billion to eliminate it.


Answer: C

Economics

You might also like to view...

During an economic downturn, increased spending on infrastructure repairs is:

A. more costly because the resources needed to complete those projects aren't available. B. a bad idea because there's no need for better infrastructure during an economic downturn. C. less costly because the resources needed to complete those projects would otherwise sit idle. D. a good idea because it will slow the pace of economic recovery.

Economics

Average Total Cost is

A. the per unit cost of production. B. the per unit fixed cost of production. C. the per unit variable cost of production. D. the addition to cost associated with one additional unit of output.

Economics

One way the government can introduce competition into a monopoly industry is to:

A. split it vertically. B. break up the company along different stages of the production process. C. split it horizontally. D. All of these statements are true.

Economics

In general, a greater population growth rate means ______.

a. lower capital stock per worker b. greater economic growth c. a higher standard of living d. fewer diminishing marginal returns

Economics